Australian Stock Market Report – Morning 2/13/14

The US Federal Government ran a $10.4 billion budget deficit in January, against expectations of $27.5 billion deficit.

US Fed President Bullard (non-voter) said that forward rate guidance had served its purpose and he expects the Fed to go back to traditional policy. He suggested that the Fed could soon, in response to the unemployment rate nearing its stated unemployment threshold of 6.5%, simply scrap its threshold guidance rather than revise it.

European shares rose on Wednesday with investors encouraged by robust banking results and the hope of rising dividends for the sector. French bank Societe Generale rose by 4.7% after posting a healthy profit. Shares in ING surged 3.6% after posting forecast beating results and said it would review the early repayment of its final tranche of state aid. The STOXX euro zone bank index lifted by 0.9% and was up about 8% so far this year. The FTSEurofirst 300 index rose by 0.7% with the UK FTSE flat while the German Dax gained 0.7%. Mining shares were also stronger in London trade with BHP Billiton shares up by 0.7% while Rio Tinto gained 1.4%.

US sharemarkets were mixed on Wednesday after Proctor & Gamble weighed on the Dow and S&P 500. Proctor & Gamble fell by 1.7% after cutting its sales and earnings outlook for the year, citing the devaluation of currencies in various developing markets. At the close of trade, the US Dow Jones was down 31 points or 0.2%. The S&P 500 was flat while the Nasdaq gained 10 points or 0.2%.

US long-term treasury prices fell on Wednesday (yields higher) as traders continued to digest the Fed President´s commitment to reducing asset purchases. US 2 year yields were flat at 0.34% while US 10 year yields rose by 3pts to 2.76%.

Major currencies eased against the greenback on Wednesday. The Euro fell from US$1.3655 to US$1.3560, and was near US$1.3590 in afternoon US trade. The Aussie dollar fell from highs near US90.70c to lows near US90.20c, and was near US90.25c in afternoon US trade. And the Japanese yen traded between 102.20 yen per US dollar and JPY102.65 and was trading near JPY102.50 in afternoon US trade.

World oil prices rose on Wednesday, but gains were muted following a build in oil inventories. US crude stockpiles rose by a higher than expected 3.3 million barrels. Brent crude rose by US10c to US$108.78 a barrel while US Nymex crude rose by US43c or 0.4% to US$100.37 a barrel.

Base metal prices were higher on the London Metal Exchange on Wednesday with Aluminium and Nickel lifting by 1.7%. The gold price rose for a sixth straight session on Wednesday with the Comex gold futures up by US$5.20 or 0.4% to US$1,295.00 per ounce. The iron ore price rose by $1 on Wednesday to US$121.00 a tonne.

Ahead: In Australia, employment data is released. In the US, advance retail sales figures are released. RBA Assistant Governor Debelle is a panel discussant in Sydney.